DFO is growing at twice the rate of the national retail sector

DFO has exceeded its reputation as being an dumping ground for old stock.

The factory outlet is attracting more Australian and overseas tourists than ever before — 17 million customers across the country each year, an increase of 40 per cent over the past eight years.

And while the terms “bargain” and “luxury” don’t often go together, its proving to be the winning formula for DFO, helping its sales to grow at twice the rate of the national retail sector.

DFO’s tenants’ sales grew 5 per cent last year across its centres in Sydney, Melbourne and Brisbane, with apparel sales leading that growth, up 12 per cent in the past two years.

While Australian Bureau of Statistic figures showed total retail spending grew 2.5 per cent in May year-on-year, industry wide spending on apparel grew at 3.2 per cent.

But it has taken close to 10 years for the factory outlet to revamp its reputation.

Queensland University of Technology retail expert Dr Gary Mortimer said it was initially a dumping ground for old stock, a factory seconds destination.

“It had odd sizes, end of range season clothing, outdated styles and colours,” he said.

But Vicinity Centres, which owns the DFO brand licence in Australia and operates centres in Brisbane, Essendon, Homebush, Moorabbin and South Wharf, said that had all changed now.
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“When you come to DFOs you’re having a better experience in getting the sizes that you like, and the quality of brands that you like,” Vicinity Centres DFO regional general manager Justin Blumfield said.

DFO recently expanded its designer tenant portfolio to include better quality local and international brands — with some retailers even stocking items specifically for their DFO outlets.

Some of the 113 up-market fashion brands to open at their first WA stand-alone store this Spring includes Diesel, Stafford Ellinson, M.J. Bale, True Alliance, Ben Sherman and Kate Spade.

“Now, more than a third of retailers have stock specifically for DFO including Coach, Michael Kors and Portmans,” Mr Blumfield said.

The general manager said outlet shopping was the fastest growing sector of the industry.

DFO’s five outlets had a turnover of $1.3 billion last year, according to Vicinity’s financial reports, which called out their growth as offsetting some of the decline at other centres.

While full-price retailers and department stores have been discounting heavily as they struggle to grow sales, Mr Blumfield said that it did not detract from DFO’s proposition of being a “destination” for discount sales.

“We’ve got a clear strategy at the DFO which differentiates ourself from traditional retail — so we feel that it can complement the traditional shop rather than cannibalise it,” he said.

Dr Mortimer said one of the problems DFO may face was market repositioning.

“If you position yourself as a direct factory outlet, however progressively move to selling products at full price, you’re going to dilute your market and confuse your core shopper,” he said.

“You eventually lose your strategic competitive advantage, your point of difference, and place yourself in direct competition with major shopping centres.”

National Retail Association CEO Dominique Lamb said consumers were shifting their shopping habits from manufactured fashion to designer brands at affordable prices.

“What they want now is a one-off item that they can have for years and they are willing to spend a bit more for it,” Ms Lamb told news.com.au

“Places like DFO are putting in those brands which are attracting not only consumers in Australia but also tourists.”

She said location was also key, with most of the DFO’s located close to airports and hotels. DFO Perth opens on Dunreath Drive next to Perth Airport in Spring this year.

“They are becoming more accessible to those tourists who want to save money on particular brands,” Ms Lamb added.

In Australia, spending by tourists — both international and domestic — has risen to a record $107.4 billion. That’s a 6 per cent increase from the previous year, according to Tourism Australia’s International Visitor Survey.

Chinese visitors topped the leaderboard, retaining their position as the biggest spenders, which increased 13 per cent, or $1.3 billion, during the past year to a record $10.9 billion.

The largest growth came from Indian visitors, with their spending growing 14 per cent to $1.5

billion.

Mr Blumfield said about 14 per cent of its customers were interstate travellers and, while he couldn’t put a figure on it, he said international visitors were an important segment.